Just as a car requires its fuel, cash and funding represent the lifeblood of a retailer’s engine; run out and you’ll come to a grinding halt.
A quick glance at the news headlines reinforces the wide range of fortunes currently being experienced by many retailers.
For those driving the ‘sports cars’ – the fast-growing, digitally led players with a clear brand proposition – funders are actively looking to fuel the next phase of growth.
For those battling the seemingly relentless economic and social headwinds, it can feel like driving along the motorway in second gear – noisy and uncomfortable!
“Access to funding is proving to be the trigger to crystallise a company’s fortunes – or misfortunes”
Recent weeks have seen a queue of retailers go through life-changing journeys. From those able to attract funding and support to restructure their businesses, as shown by the likes of Jigsaw’s refinancing or New Look’s CVA, to those who have reached the end of the road, such as Toys R Us and Maplin.
While many retailers are rightly focusing on the day job of high quality retailing, as for previous downturns, access to funding is proving to be the trigger to crystallise a company’s fortunes – or misfortunes. After all, cash really is king.
2018 has undoubtedly seen greater scrutiny applied to lending decisions by funders, keen to ensure that their lending positions remain robust in the face of market uncertainty.
This has placed a greater burden of proof on borrowers to evidence credible plans, robust controls and considered financing strategies.
Perhaps the greatest difference to previous cycles has been the proliferation of credit funds as mainstream financing providers.
These parties have become the ‘hybrid’ vehicles of the market; willing and able to take on greater risk than traditional lenders, and with the flexibility to structure and price their funding to reflect a business’s specific requirements – and this can also mean backing to invest in growth.
For those who have successfully navigated these markets, the road to funding has been defined by four very common threads.
First, time is often the most precious commodity, and addressing funding requirements early enough will typically optimise the outcome, so retailers must act quickly and pragmatically.
Secondly, managing cash as if it is your own. During any ‘pinch points’, effective cash management can help provide the stable platform to deliver funding plans. The effect this has on credibility with stakeholders should not be underestimated.
Thirdly, retailers should maximise optionality by evaluating and pursuing the various funding and restructuring options available to them, providing plans A, B and C.
“It is worth remembering that retail will always exist – it is just changing – and with change comes opportunity”
Even where traditional routes to capital may be more constrained, there are a range of other providers with appetite to fund the sector or offer options that might serve to improve the prospects of securing support.
And finally, retailers need to exercise effective stakeholder management by proactively engaging with stakeholders and preempting their concerns. This could help to build credibility and give the best prospect of bringing stakeholders along on the retailer’s journey.
In amongst all of the noise, it is worth remembering that retail will always exist – it is just changing – and with change comes opportunity. Or, as more purposefully put by Winston Churchill, “never let a good crisis go to waste”.
Navigating the current funding market needs a pair of steady hands on the wheel, a clear sense of direction on where to go and, of course, someone to put their foot down.